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SEC Filings

S-4
AVALON CABLE OF MICHIGAN INC/ filed this Form S-4 on 04/01/1999
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   As a result of the legislation and regulations, we presently face
competition from, among others, satellite services whereby signals are
transmitted by satellite to receiving facilities located on customer premises.
Programming is currently available to the owners of satellite dishes through
conventional, medium and high-powered satellites. Satellite systems generally
provide movies, broadcast stations and other program services similar to those
provided by cable television systems, although some satellite services offer a
greater number of channels and programming packages than are available through
cable television systems. Satellite service known as direct broadcast satellite
("DBS") service can be received anywhere in the continental United States
through installation of a small rooftop or side-mounted antenna. This
technology has the capability of providing more than 100 channels of
programming over a single high-powered satellite with significantly higher
capacity if multiple satellites are placed in the same orbital position. DBS is
currently being heavily marketed on a nationwide basis by three DBS providers,
and a fourth company is also proposing to provide DBS services over multiple
satellites. Announced acquisitions may consolidate all DBS spectrum and assets
into the two dominant DBS providers. DBS providers provide significant
competition to us and other cable service providers. Legislation pending before
Congress may substantially remove the legal obstacles to DBS delivery of local
and distant broadcast signals.
 
   The digital satellite service offered by DBS systems has certain advantages
over cable systems with respect to programming and digital quality. By
upgrading our systems and using digital compression technology, we expect to be
able to offer expanded programming choices and services, more channels and
better picture quality, allowing us to compete more effectively with DBS
systems. Furthermore, DBS does suffer certain significant operating
disadvantages compared to cable television, including the subscriber's present
difficulty in viewing different programming on more than one television set,
line-of-sight reception requirements, up-front costs associated with the dish
antenna and the lack of local programming. DBS providers currently face
technical and legal obstacles to providing broadcast signals, although certain
DBS providers currently provide local and distant broadcast signals in certain
major markets. The FCC has recently adopted regulations that may reduce the
impact of the existing legal obstacles DBS providers face with respect to these
services.
 
   Cable television systems generally operate under franchises granted on a
non-exclusive basis, so that more than one cable television system may be built
in the same area (known as an "overbuild"), with potential loss of revenue to
the operator of the original system. It is possible that a franchising
authority might grant a second franchise to another company containing terms
and conditions more favorable than those afforded to us. The 1992 Cable Act
prohibits franchising authorities from unreasonably denying requests for
additional franchises and does not prevent franchising authorities from
operating cable systems. Well-financed businesses from outside the cable
industry may compete with us for franchises or provide competing services.
Potential competitors include the public and municipally owned utilities that
own certain of the poles on which cable is attached. Certain municipal power
companies have been considering building new video networks to compete with us
within the areas where they deliver power. Overbuilds historically have been
relatively rare, as constructing and developing a cable television system is
capital-intensive, and it is difficult for the new operator to gain a marketing
advantage over the incumbent operator. Nonetheless, on a pro forma basis as of
December 31, 1998, less than 5% of homes passed by our Michigan Cluster have
been overbuilt and none of the homes passed by our New England Cluster have
been overbuilt. We believe that our systems are less likely to be overbuilt
than those of many other operators because our targeted markets have lower
population densities.
 
   We also compete with local exchange telephone companies (which we refer to
as "LECs"). The Telecommunications Act of 1996 makes it easier for LECs and
others to provide a wide variety of video services and to provide multichannel
video programming services to subscribers. Various LECs currently are providing
multi-channel video programming within and outside their telephone service
areas through a variety of distribution methods. Such distribution methods
include both the deployment of broadband wire facilities and the use of
wireless terrestrial transmission facilities. In addition, certain LECs may not
be required, under certain circumstances, to obtain local franchises to deliver
these video services or to comply with the variety of obligations imposed upon
cable systems under these franchises. As a result, cable systems could be
placed at a
 
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